Real Estate News

What You Can Learn From Toronto's 2017 Real Estate Bubble

Today we're releasing a new report featuring my analysis of last year's real estate bubble - why it happened and how it affected home buyers and sellers in Toronto and the Greater Toronto Area (read the full report here).

I think this type of analysis is important because I'm frustrated when I hear, particularly from industry voices, that 'no one saw this coming' and the suggestion that consumers were hurt due to 'bad luck.' While it may be impossible to predict the market perfectly, it is possible to track it carefully to help consumers make better real estate decisions - and analysis has enabled us to better advise our buyer and seller clients on how to avoid the negative outcomes experienced by other consumers during last year's volatility.

I'm also frustrated that some, particular policymakers, may feel that the numbers of consumers directly affected - those who lost money buying or selling a home during this time - is limited and not of more general concern. But all of us are suffering from and impact of the bubble - increased housing unaffordability in Toronto and the GTA - and the likelihood of future volatility if the powers that be continue to do much of the same.

Here are the highlights:

The Toronto real estate market started 2017 with prices up 34% in March over the previous year, then saw prices tumble 18% in just four months when the bubble burst.

In spite of arguments from the real estate industry that Toronto’s housing bubble was driven by supply-side constraints, the data suggests otherwise – a closer look at population growth and new construction figures relative to the period in question do not suggest a likely explanation.

On the other side of the equation, the Greater Toronto Area (GTA) saw a surge in demand beginning in 2015, with sales up 29% above the GTA’s ten-year trend by 2016, with evidence to suggest that speculative investment activity played a significant role.

During the first quarter of 2017, investors accounted for at least 16.5% of all purchases of low-rise houses in the GTA, a 65% increase year-over-year. Increases differed greatly within the GTA, with York Region’s Newmarket and Richmond Hill accounting for the highest level of investor activity at 34% and 28%; in 2012, such activity was 7% and 9%.